How To Calculate For SMEs

For profit-making businesses, R&D tax credits reduce your Corporation Tax bill. The rate of relief is 25%. So if your R&D spend last year was £100,000, you could get a £25,000 reduction in your tax bill.

For a loss-making SME, R&D tax credits will be given in the form of a cash payment. In these circumstances the rate of relief equates to broadly 33%. So if your R&D spend last year was £100,000, you could get a £33,000 cash credit.

How To Calculate For RDEC

The Research & Development Expenditure Credit (RDEC) is available to Large Companies who fail to meet the eligibility criteria for the SME scheme as well as SMEs who are prevented from claiming under the SME scheme.

Your RDEC claim is paid as a taxable credit of 13% of your identified R&D costs. As this is taxable it results in a cash benefit of 11% after tax.

These costs can be offset against your tax bill or, if there is no tax payable, you will receive the net amount as cash. So if your R&D spend last year was £100,000, you could get a £11,000 cash credit or tax reduction.